Mortgage Rating Drops for Westfield San Francisco Centre

UPDATED AUG. 16 at 12:40 p.m.:

Fitch has downgraded an $890 million pool of commercial real estate mortgages backed by San Francisco’s troubled Westfield San Francisco Centre mall, plus an office campus in Lafayette.

The credit rating agency said the “largest contributor to overall loss expectations” among the loans is Mount Diablo Terrace in the East Bay city, followed by the Westfield mall at 865 Market Street, the San Francisco Chronicle reported. The specific rating of the loans was not disclosed.

Occupancy at the 81,600-square-foot office park at 3466 Mount Diablo in Lafayette fell to 53 percent from 88 percent in late 2019. Meanwhile, occupancy at the 1.5-million-square-foot Westfield San Francisco Centre fell to 46.1 percent in March from 73.9 percent in late 2021. The office portion of the center is 94.6 percent vacant.

In June, Paris-based Unibail-Rodamco-Westfield and its partner, New York-based Brookfield Properties, quit making payments on a $558 million loan and surrendered the mall to its lender.

The nine-story property will be handed over to a receiver.

The owners of the 35-year-old mall with 170 stores cited a plunge in shoppers and sales since the pandemic.

Seattle-based Nordstrom, citing “the dynamics of the downtown San Francisco market,” said it would close its 312,000-square-foot store at the mall this month. It had been there since the mall opened in 1988.

Westfield blamed the Nordstrom exit on “unsafe conditions” and “lack of enforcement against rampant criminal activity.”

San Francisco State University, which took up more than half of the 200,000 square feet of the building’s offices, also headed for the exits.

The mall generated $455 million in sales in 2019 before the pandemic, according to Westfield. Last year, it took in $298 million.

In June, when the mall owners announced a default on the loan, Mayor London Breed tossed out potential uses for the property, including a soccer stadium.

“A Westfield mall could become something completely different than what it currently is,” she said. “We could even tear down the whole building and build a whole new soccer stadium.”

Correction: Previous story incorrectly attributed ownership of Mount Diablo Terrace in Lafayette.

— Dana Bartholomew